Eron Silverstein, 51, right, shops for marijuana at the MedMen store in West Hollywood, California, January 2, 2018. Lucy Nicholson/Reuters

US venture capital dropped $303.9 million into the cannabis industry in 2017, up from just $1 million in 2012.

Most of the top venture-backed companies in the space are either biotech companies or those that provide ancillary services, like software platforms and payroll management.

The murky legal status of cannabis in the US has given rise to cannabis-focused venture funds, which thrive in the uncertainty.

The legal-marijuana industry is booming in spite of the federal government's antagonistic attitude toward the plant.

According to data and research firm Pitchbook, American venture capital put $303.9 million into 79 marijuana industry deals in 2017, up from just $1 million in 2012 when Colorado first legalized the drug. And 2018 is on pace to break 2017's record. By the end of February, there were 12 venture-backed deals worth $159.4 million alone.

Looking at the highest-valued venture-backed companies in the marijuana industry, there are two clear patterns.

Money is flowing into the ancillary side — tech companies that provide software or payroll services to the cannabis industry but don't actually touch the plant. It's also moving into biotech companies that are researching and developing patents around cannabis compounds for medical purposes.

In the near future, the ancillary and biotech sectors look poised to dominate the cannabis industry, at least in the US. For now, venture capitalists are shying away from cultivators and other plant-touching businesses to avoid tangling with federal law and inviting a crackdown by the Justice Department.

Jenny Cheng/ Business Insider

According to Roy Bingham, the founder of BDS Analytics, a business-intelligence firm for the cannabis industry, concerns about the regulatory environment "still hang over" American investors and largely exclude mainstream venture capital firms from investing.

This has given rise to a number of cannabis-specific venture firms — mostly funded by a mix of wealthy people and entrepreneurs who may have a higher appetite for risk than institutional investors — like Poseidon Asset Management, Casa Verde Capital, and Phyto Partners. Privateer Holdings, an investment firm that functions as a Berkshire Hathaway-type holding vehicle for cannabis companies, is valued at $490 million.

"They're very consciously only investing in cannabis-related activities as opposed to that being a piece of their bigger portfolio," Bingham said. "They've said, 'OK, that is actually a benefit, that's an advantage for us that there's this regulatory uncertainty, which will keep the big guys out for a period of time.'"

That hasn't stopped some of the bigger, more mainstream venture-capital firms from making investments in the marijuana space. They're just focusing on companies that offer ancillary services to the industry.

Veteran media firm Lerer Hippeau Ventures, backer of the Huffington Post and BuzzFeed, invested in HERB, a cannabis-media company based in Toronto, in August. And Michael Lazerow, of Lazerow Ventures, has personally invested in Baker, a software platform for dispensaries.

Micah Tapman, a managing director at cannabis accelerator and venture-capital firm Canopy Boulder, told Business Insider that the "smart money" is looking toward the high-end medical side of the industry. Of the top 15 venture-backed cannabis companies, according to Pitchbook's data, four are healthcare-specific.

Teewinot Life Sciences, in Florida, is working on the biosynthetic production of pharmaceutical-grade cannabinoids (the active chemical compounds in the cannabis plant), according to the company's website. Tuatara Capital, a fund focused on the biotech side of the cannabis industry, led a Series B round for Teewinot last year, valuing the company at $138 million.

And Anandia Labs, a Vancouver-based marijuana testing company, closed $13.4 million in funding in January, pushing the company's valuation over $50 million.

At the same time, ancillary services companies— like Baker and Leaflink — have high valuations driven up by enthusiasm around the industry. They also allow more mainstream investors to get a foothold since they aren't flouting any federal regulations by getting involved.

Some of the companies that got in at the right time may be overvalued, according to Tapman.

Eaze, a cannabis-delivery service, "raised money at the perfect time," Tapman said. "They had great connections and a good story," Tapman said. "But it's yet another delivery service of which there are a thousand."

Companies like Leaflink— a New York-based online marijuana marketplace valued at $50 million after a round of investment in November — that have strong brands and competent management teams could be "huge," according to Tapman and Bingham, but the risk of overvaluation is still present.

One of those brands, MedMen, operates 11 retail marijuana dispensaries in California, where marijuana is legal for adult consumption. It recently became one of the first American "unicorns" in the cannabis industry, valued at over $1 billion after closing a $41 million round of fundraising in February.

MedMen, the highest-valued venture-backed company, is a plant-touching company — creating an opportunity for Canadian investors, who don't need to worry about the US federal government interfering in their business. MedMen's last round was led by the Toronto-based Captor Capital.

"People are creating brands now that have great value," Bingham said.

Editor's note: We initially reported Teewinot's Series B valued the company at $80 million. The correct number is $138 million.